CIS PENSION ANNUITY POLICY Reminder of important facts Pensions
What is a Pension Annuity policy? Your pension policy is a tax-efficient way of building up a pension pot to provide you with pension benefits in your retirement. The options available to you are included in the Taking your pension benefits section. Do I get tax relief on my pension savings? To encourage people to save for their retirement, the Government gives income tax relief on your pension contributions. You should claim the tax relief through your Self Assessment tax return if you complete one, or by asking H.M. Revenue and Customs to adjust your PAYE (Pay As You Earn) tax code if you don t. Where does Royal London invest my pension contributions? We invest your contributions, together with the contributions of other with-profit policyholders, into the RLCIS OB & IB Fund, referred to here as the with-profits fund. The fund is managed by an experienced fund manager and aims to achieve steady growth by investing in a wide range of assets such as shares, property and government bonds. We aim to pass on a share of the withprofits fund s investment returns to you. We do this by adding annual and final bonuses to your policy. Once added, we guarantee we will pay the annual bonuses to you at your Chosen Retirement Date*. However, please note that the addition of bonuses depends on the fund s performance and there is no guarantee that we will add future bonuses to your policy. We will also deduct a small amount from each bonus to cover the costs of managing your policy. We explain how we manage the withprofits fund in the Principles and Practices of Financial Management (PPFM) of the RLCIS OB & IB Fund document available on our website royallondongroup.co.uk/rlcis/ or on request. In the event of conflict between this guide and the PPFM, the PPFM shall prevail. Does my policy have any guarantees? When your policy was set up Your Pension Annuity policy was written to provide you with a guaranteed regular income at your Chosen Retirement Date* as long as you pay all your pension contributions up to that date. This regular income is known as your Basic Annuity. You could also receive a lump sum, linked to your Basic Annuity, at your Chosen Retirement Date. We set your Basic Annuity when you took your policy out by making assumptions on: 1. The future investment returns we would make by investing your pension contributions in the with-profits fund and; 2. The number of years we would pay regular income to you before you died. 2
In recent years We may have added annual bonuses to your policy when investment returns were good. If so, we guarantee to pay these bonuses to you on your Chosen Retirement Date. However, our investment returns in recent years and expected future investment returns are much lower than we assumed when you took out your policy. Because of this we have reduced, or even stopped, annual bonuses for some types of policy. Life expectancy rates have also increased significantly since you took out your policy. This means that pension providers, including Royal London, have to pay regular income to people for a longer period. What this means for you The combination of lower than expected investment returns and increased life expectancy means that your policy could be worth less than the Basic Annuity plus annual bonuses. However, if on your chosen retirement date you use your pension pot to buy a regular income from Royal London, we guarantee to pay you your Basic Annuity and any bonuses we have added. When can I take my pension benefits? Pension benefits can be taken from age 55. We will write to you in the months leading up to your Chosen Retirement Date to inform you of your retirement options, unless you contact us to request an earlier retirement date. Taking your pension benefits The Government has made a number of changes to the way in which you can take your pension benefits. This means that you now have more choice than ever before in how you can take the pension pot you have saved. In summary, these choices are: Option 1 Take all your pension pot as a single lump sum (25% is tax free). Option 2 Convert your pension pot into a guaranteed income for the rest of your life. This is called an annuity (including the option to take up to 25% as tax free cash). Option 3 Take some of your pension pot and leave the rest invested for another time. You can take a series of lump sum payments or income at different times or a mix of both (including the option to take up to 25% as tax free cash). Option 4 Postpone taking your pension pot you can leave your pension benefits with us until you are age 75, after which you will be required to take your pension benefits. You cannot normally take advantage of these options until you have reached age 55. However, if you are unable to work because of poor health then you may be able to take your benefits earlier. As you approach your Chosen Retirement Date we will send you a detailed pack with all your options and with details of what you need to do. 3
To help you understand your options and make the right choices, the Government is making available a free and impartial guidance service - Pension Wise. We strongly recommend that you use this service to help you understand your options and make the right decision. You can access Pension Wise online by visiting gov.uk/pensionwise. This service will not provide advice or recommend specific products or providers. If you feel you need advice, we recommend you talk to a financial adviser. If you do not have a financial adviser, you can get details of local financial advisers by visiting unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost to you beforehand. What happens if I die before I take my pension benefits? If you die before you take your pension benefits, we will pay a lump sum to your beneficiaries. If you die before the age of 75, it will normally be paid tax free. If you die after the age of 75, it will be subject to tax at 45% if it is paid before 6 April 2016. After this date it will be taxed as income, i.e. depending on their total taxable income in a year, your beneficiary may pay income tax on these payments. We recommend that you speak to a financial adviser before you transfer your policy. Can I stop paying my pension contributions? You can stop paying your pension cotributions at any time, but this will reduce your Basic Annuity. Any future bonuses will also be based on this reduced amount. Additional information This guide is a short reminder of the main features of your Pension Annuity policy and any important changes that might affect your policy. You should refer to the policy document we sent to you when you took out your policy, together with any contract endorsements, for more detailed information. In the event of conflict between this guide and the policy document, the policy document will prevail. Notes *Throughout this document, whenever we refer to Chosen Retirement Date, this is the date that you originally stated you would like to retire and is the date shown on your annual statement (unless subsequently changed). Can I transfer my policy? You can transfer your policy to another pension provider at any time before you take your pension benefits. We will not charge you for doing this. 4
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If you would like a copy of this leaflet in large print, audio or Braille, please call us on 0345 605 7777. Royal London Churchgate House, 56 Oxford Street, Manchester, M1 6EU royallondon.com The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL. MKT2625_RL 03/2015